How to….sell local authority owned land

As local authorities strive to manage their resources effectively, taking opportunities to dispose of land that they do not need can be an important way of generating income. 

Land disposal can also make an important contribution to regeneration by making land available for development.

When they dispose of land, local authorities need to make sure that they are aware of the full range of legal issues, as failure to comply with any of them will make a local authority’s decisions vulnerable to challenge, writes Tiffany Cloynes, partner at law firm Geldards.

Powers

A local authority must act within its powers in every disposal of land it makes.  An important aspect of this is to know the purpose for which land is held because this will determine which power the local authority will use and any particular requirements and constraints that apply to the exercise of the power.

On many occasions, a local authority will use the power in section 123 of the Local Government Act 1972, which gives a local authority power to dispose of land held by it.  This is subject to a duty for the local authority to obtain the best consideration that can reasonably be obtained unless the disposal is for a short tenancy or the local authority has the Secretary of State’s consent, or in Wales the consent of the Welsh Ministers.

Consents

General consents have been issued, which allow the disposal of land for less than best consideration if a local authority considers that the disposal would contribute to the promotion or improvement of the economic, social or environmental well-being of its area and the extent of the undervalue is no more than £2m.

These consents can be very useful in regeneration schemes, where a particular disposal will contribute to well-being objectives being pursued by the local authority but the local authority needs to have good evidence to show why it considers the proposed arrangement will help achieve those objectives.

The local authority needs to ensure that any disposal complies with State aid rules and with the authority’s fiduciary duty.

Selling land for development

If a local authority expects the land it sells to be used for development, it will be important for it to assess whether public procurement legislation will apply.  Disposal of land is not itself subject to public procurement legislation but if the transaction involves a contract for pecuniary interest concluded in writing, with an obligation for a developer to construct works to the authority’s specification, there will be a public works contract which will need to be procured in line with the relevant legislation.

When local authorities get this wrong, they could find important projects being set aside or delayed extensively.  There is some scope for local authorities to let purchasers know of their vision for particular area and to agree negative provisions such as a right to buy back land, without going through a procurement exercise, as long as no positive binding obligation is imposed.

Courts have accepted this approach but the case of Faraday Development Ltd) v West Berkshire Council [2018] showed the limits of this type of approach.  If a local authority does not run a procurement exercise, it must not specify works to be completed and must not put itself in the position of making a commitment to do so in the future.

Requirements affecting different types of land

Local authorities need to be aware of the requirements associated with particular types of land.

For example, a proposed disposal of open space needs to be advertised for two consecutive weeks in a local newspaper and the local authority must consider any objections it receives.

Local authorities in England need the consent of the Secretary of State to dispose of school playing fields.

In Wales, local authorities are subject to obligations relating to impact assessment, notice and consultation and consideration of representations before they dispose of playing fields.

If land is on the list of assets of community value of a local authority in England, the local authority will need to comply with notification requirements and moratorium periods before disposing of it.

As well as complying with particular legal requirements, local authorities need to ensure that their use and disposal of land is consistent with their policies and procedures.  They should also decide to what extent land disposal will feature in their income generation strategies and should implement those strategies effectively.